REAL WORLD FOCUS 10.1 The textile industry in Naoussa ent Naoussa is a city in northern Greece with a centuries- old textiles industry, based on highly labour-intensive bour production methods. When the markets of neighbouring transition economies opened up in the 1990s, Greek firms found it profitable to relocate to countries including In Albania, Bulgaria, North Macedonia and Romania, on account of their far lower labour costs. The Greek government introduced legislation intended to lower labour costs (easier firing rules, extension of over-time work), yet in Greek firms used some of these provisions to reduce their local workforce and move abroad. In 2005, the removal of trade barriers on imports of Chinese textiles (according to WTO rules; see Chapter 15) led to a huge increase in Chinese textiles in the Greek market, forcing many Greek textile firms to close down as they were unable to compete with the lower-cost Chinese imports. Figure 10.2: Greek textile design with olive branches Naoussa was one of the areas most strongly affected. The combination of firm relocations and firm closures led to the loss of tens of thousands of jobs. In 2005, unemployment in Naoussa was estimated to have reached a record 35-40%. this Source: Adapted from Mary Lembessi, 'Clothing exports dealt a blow' in Kathimerini, 23 September 2005; European industrial relations observatory on-line', Measure adopted in support of redundant textiles workers', 2 October 2006. Applying your skills 1 Identify the kind of unemployment was Naoussa experiencing by 2005. 2 Use a demand and supply diagram to explain how this type of unemployment came about. a Use a demand and supply diagram to show the effects of legislation intending to lower labour costs in the textile industry. Why do you think this legislation was ineffective in keeping Greek firms from relocating? 6